When is it a good time to refinance your mortgage loan? Some experts say if you can’t lower your rate 2%, the costs don’t outweigh the savings. However, in the last few years, with rates dropping to all time lows, people have refinanced for even 1% savings in the interest rate. If your mortgage has a higher interest rate than current rates, and you can lower your monthly payments, you may want to look into refinancing your mortgage loan.
To follow are some questions you should consider on whether or not you need to refinance your mortgage loan. Do you have the cash on hand to pay the fees? Depending on the loan amount, and the fees your lender charges, you could pay anywhere from a couple of hundreds dollars to a few thousand dollars in closing costs. You should also shop your lenders and fees they charge. What are the current interest rates compared to your current mortgage rate? Will it really save you enough in monthly payments to refinance including your costs to refinance?
With rates now on the increase, if you have an ARM mortgage, it may be a good time for a fixed rate mortgage loan so your payments won’t go up again as rates continue to rise at your next rate adjustment. This is one area that you probably will want to look closely at if you have an ARM mortgage in today’s market. If you have a fixed rate, but bought your home when interest rates were higher, you might want to refinance in order to lower your rate and monthly payments.
If you have a lot of consumer debt, you could take advantage of a cash-out refinance loan. With this type of loan, you add on an amount to your home loan, refinance consumer debts to a lower interest rate, and then take the “extra” money out and pay off consumer debts. This will allow you to reduce the amount of debt you owe (because the interest rate will be lower), reduce the amount of the monthly payments, and depending on your tax bracket, may move that consumer debt to be tax deductible under mortgage interest. Check with your tax advisor to see if you could benefit from this feature.
Most experts agree that you shouldn’t go to the expense of refinancing your home if you don’t intend to stay in it for at least three years. Otherwise the cost of the process would likely be more than the overall savings. However, you also want to consider moving of consumer debts to a tax deductible status to be of cost savings benefits for you in this area. And, if you have an ARM Mortgage now, it probably will benefit you now to move into a fixed rate mortgage loan product.
If you have a higher interest rate loan, you also can not only reduce your monthly payment but in some cases, you can reduce the term of your loan to even ten (10) to fifteen (15) years. In a lot of cases, your payment remains about what you are paying now but the advantage is the savings in repayment of interest in the reduction of the loan term. This is appealing to consumers that would like to see their mortgage loan actually paid off within a reasonable amount of time.
Michael Domeck was a multiyear sales and listing award winner for Century 21 and has designed and built many homes over the years. His wife has been doing mortgage financing for over 20 years. Together they can show you what all the "mortgage hype" is all about. Find out the secrets to getting the best mortgage financing at the best rates and the lowest fees. Learn why re-financing may NOT be the best way to go and why! Visit =>Free Advice Mortgage Re-Finanacing to get Free Advice on Mortgage Refinancing, Mortgage loans and how to handle credit problems!
